Archives for August 2023

WHY SOME INVESTORS ARE ON THE SIDELINES WHILE OTHERS SEE OPPORTUNITY​

Expectation Gap Shrinking But Still A Factor​

• In general, buyer sentiment is that CRE pricing is still too high in the summer of 2023​
• Sellers that need to act are moving to the market pricing to secure deals​

Significant Number Of Deals Are Penciling Despite Gap​

• Nearly 30,000 CRE transactions occurred in the first half of 2023, highlighting solid liquidity during the slowdown​
• Smaller deals involving private investors have made up a higher percentage of first half deals in 2023​

What Opportunity Are Buyers Seeing?​

• Investors are tracking demographic trends, and some are determining the future gains outweigh the short-term rise in financing costs​
• Today’s climate reinforces the importance of analyzing property and market trends when making decisions​

*Through 2Q​
Sources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc.​

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IS A CONSUMER DEBT CRISIS ON THE HORIZON?​

Media Focusing On Record High Consumer Debt​

• Total household debt in the U.S. reached a record $17T in July, while revolving credit surpassed $1T ​
• Inflation adjusting theses figures, brings consumer debt back into perspective​

U.S. Economy More Productive Than Ever​

• Debt levels have risen, but so have incomes and GDP, increasing consumers ability to make debt payments​
• Consumer loans as a percentage of GDP are trending lower than they have in the past 2 decades​

Debt Unlikely To Hold Back Demand In 2023​

• If consumer confidence continues its upward pace, consumers willingness to spend and form new households should not be restricted by debt burdens​
• Banking turmoil, Fed decisions, or any number of events could shake confidence, but the current trend is positive​

*Through 1Q​
Sources: Marcus & Millichap Research Services, Board of Governors of the Federal Reserve System​

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INFLATION, SENTIMENT, AND THE IMPACT ON COMMERCIAL REAL ESTATE​​

June Inflation Trending Higher, But Trend Is Positive​

• Headline inflation rose to 3.2%, but the more important Core CPI number fell​
• The housing component of CPI remains elevated, but is forecasted to fall, aiding the current trend further​

Brightened Outlook Boosting CRE Space Demand​

• Confidence and sentiment measures for consumers, small businesses and CEOs are all rising in July​
• Absorption is likely to rise across products if recession fears keep decreasing and individuals feel optimistic​

What To Expect in 2H 2023​

• Wall Street is expecting the Fed to keep overnight rates flat through the December meeting​
• If positive moment is sustained, it offers a strengthening CRE outlook

*Through 2Q; Small Business Optimism through July​
Sources: Marcus & Millichap Research Services, University of Michigan, The Conference Board, NIFB ​

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WHAT IS HAPPENING WITH SALES VELOCITY AND COMPOSITION?​

1H 2023 Transactions in Line With Long-Term Average​

• Despite falling from last year’s levels, 1H 2023 saw CRE deals match the 10-year 1H average​
• Apartment and office deal flow is below the long-run average, while industrial and retail sales are above​

​Private Investors Dominating CRE Acquisition Activity​

• With the disproportionate slowdown in high-price properties, private investors now make up 80% of the buyer pool above $1 million​
• Investors should be aware of the role private investment is playing in 2023 when both listing properties and pursuing opportunities

*Estimated sales for 2Q 2023​
Sources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc.​

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